What Does A Managing Director Do And How Do You Appoint One In Singapore?

What is a managing director?

A managing director is responsible for the daily operations of a company or business unit. They typically lead employees, manage the company’s resources, and help come up with business plans and strategy. A managing director is appointed from among the members of the board of directors. This makes them a top-ranking senior executive of the company.

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What does a managing director do in Singapore?

A managing director in Singapore has considerable control over the company’s operations. A managing director’s job description includes the following:

• Advising the chairman and board members on strategic matters and reporting on outcomes.
• Creating business plans to increase revenue, reduce operating costs, and so on.  
• Monitoring the implementation of business plans and reporting on their results.
• Making sure that budgets are followed and targets (revenue, sales, etc) are met.
• Keeping accounting records. 
• Setting business goals and ensuring that employees move in line with these goals.
• Managing key employees, clients, service providers, investors, and stakeholders.
• Making new hires and keeping existing employees happy, satisfied, and motivated.  
• Finding clients, making deals with new companies or individuals, and representing the company in negotiations.
• Ensuring that company policies comply with Singapore laws and regulations.
• Maintaining links with important clients, government agencies, and local authorities. 
• Convening company meetings and attending board meetings.

What are the duties and responsibilities of a managing director in Singapore?

The role of a managing director carries a lot of responsibilities. First of all, professionals in this position of power must fulfil the following fiduciary or ethical duties:

1. Act in the company’s best interest: A managing director must understand the long-term consequences of their actions and decisions as well as the impact of the company’s operations on society and the environment. A managing director’s responsibilities include promoting a culture of fairness and transparency, maintaining high standards for quality and business conduct, and prioritising the interests of employees, among others.
2. Be honest: This means not taking rewards and benefits from third parties and conducting the company’s business in compliance with local laws and rules. Managing directors must avoid conflicts of interest – being distracted by personal interests or loyalties to a rival company, for example – at all times.
3. Use their powers judiciously: A managing director holds immense authority. To be effective in their role, they must always use their powers for what they are intended and no more.
4. Be good decision-makers: Given a managing director’s responsibilities, the position calls for highly skilled individuals with impeccable leadership and organisational qualities, strong communication and interpersonal skills, good decision-making and problem-solving abilities, and a keen knowledge of the industry and market in which they operate. Being senior executives, managing directors must show the courage and willingness to take major and often tough decisions. These decisions must be based in fact and backed by data so that they show the desired outcomes. A good decision-maker is open to the opinions of others and is willing to invite feedback and even criticism. This will ensure that they make informed decisions that are also less likely to run into resistance.

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Managing director vs CEO

The terms ‘managing director’ and ‘chief executive officer’ (CEO) are often used interchangeably, but there are subtle differences. In companies that have both positions, managing directors usually manage individual business units whereas the CEO is responsible for the company as a whole. In terms of responsibilities, the CEO is in charge of coming up with business plans and strategy while the managing director helps the CEO implement these plans and closely manages the day-to-day operations of the company. Therefore, one can say that a managing director is more actively involved with the company’s operations than a CEO. As for hierarchy, the managing director takes orders from the CEO while the CEO is appointed by and reports to the board of directors, of which the managing director is also a part.

Managing director vs CEO: Key differences

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Is appointing a managing director a legal requirement?

Appointing a managing director – or even a CEO, for that matter – is not a legal requirement in Singapore. Companies simply choose to give their senior executives these designations to clearly define their roles and responsibilities. But even if their appointment is not a legal formality, managing directors and the companies hiring them must comply with certain legal requirements.

For one, it is mandatory under the Companies Act for companies to maintain registers of all their directors and CEOs and to file these with the Accounting and Corporate Regulatory Authority (ACRA), which keeps these registers in electronic format. Companies must keep their registers current and updated at all times. For example, if a new director has been appointed, the company must file this information on BizFile+ (ACRA’s online filing system) within 14 days of the appointment date. The details to be filed include the individual’s:

• Full name
• Residential address
• Contact number and email ID
• Nationality
• Identification number
• Date of appointment / cessation of appointment

Secondly, Singapore has strict disclosure requirements for company directors, including managing directors and CEOs. In keeping with their duty to act for the company’s best, directors must disclose information about any shares, debentures, and rights/options (to shares) they might hold in their company and/or in its subsidiaries. The company, in turn, must enter this information in a Register of Directors’ Shareholdings. A similar Register of CEOs’ Shareholdings must also be maintained. However, unlike managing directors, CEOs are required to disclose their interests only in the company and not in its subsidiaries. Failure to disclose such information or to maintain the registers can lead to legal action.

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How is a managing director in Singapore appointed?

A managing director is generally appointed by an ordinary resolution passed by shareholders at a general meeting of the company. An ordinary resolution is a formal decision backed by at least 50% of the votes cast at the meeting, either in person or in writing. The resolution states the appointment of the new managing director and the date on which the appointment takes effect. While this is the most common way of appointing a managing director in Singapore, specific details of the appointment procedure are mentioned in each company’s constitution. This is a document that outlines the rules and regulations by which the company will be governed and also states the rights and responsibilities of its directors, shareholders, and company secretary.

When appointing a managing director, companies must ensure their chosen candidate fulfils the eligibility criteria:

• They must a natural person (an entity or corporation cannot be a director)
• They must be 18 years of age or more
• They must not be disqualified from holding the post on account of being bankrupt, convicted of fraud or of crimes involving dishonesty, convicted of filing offences under the Companies Act, and so on.       

How can a managing director quit or be removed?

A managing director in Singapore may quit by writing a letter of resignation and complying with the resignation procedure laid out in the company constitution. The company needs to inform ACRA of the cessation of the director’s appointment within 14 days and make the necessary changes in the Register of Directors.

To remove a managing director from office before their term is over, the company must get another ordinary resolution of shareholders passed and inform ACRA of the changes within 14 days.

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If a managing director is removed for violating their fiduciary (ethical) duties – acting in the company’s best interests, avoiding conflicts of interest, avoiding profiting and abuse of power, etc – they might also face a lawsuit in a civil court. In such an instance, the company can potentially claim compensation for damages caused to the business, demand the payment of profits made or transfer of property acquired by the director while in breach, declare decisions taken by the director as invalid, and so on. Furthermore, conviction can result in repercussions, potentially including fines, imprisonment or disqualification from holding the position of a director again.

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